Portfolio insurance under a risk-measure constraint
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Publication:654812
DOI10.1016/J.INSMATHECO.2011.05.009zbMATH Open1228.91061arXiv1102.4489OpenAlexW4298434486MaRDI QIDQ654812FDOQ654812
Authors: Carmine De Franco, Peter Tankov 
Publication date: 21 December 2011
Published in: Insurance Mathematics \& Economics (Search for Journal in Brave)
Abstract: We study the problem of portfolio insurance from the point of view of a fund manager, who guarantees to the investor that the portfolio value at maturity will be above a fixed threshold. If, at maturity, the portfolio value is below the guaranteed level, a third party will refund the investor up to the guarantee. In exchange for this protection, the third party imposes a limit on the risk exposure of the fund manager, in the form of a convex monetary risk measure. The fund manager therefore tries to maximize the investor's utility function subject to the risk measure constraint.We give a full solution to this nonconvex optimization problem in the complete market setting and show in particular that the choice of the risk measure is crucial for the optimal portfolio to exist. Explicit results are provided for the entropic risk measure (for which the optimal portfolio always exists) and for the class of spectral risk measures (for which the optimal portfolio may fail to exist in some cases).
Full work available at URL: https://arxiv.org/abs/1102.4489
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utility maximizationconvex risk measuresportfolio insuranceentropic risk measurespectral risk measure
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Cited In (25)
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- Portfolio insurance with liquidity risk
- On the equivalence between value-at-risk- and expected shortfall-based risk measures in non-concave optimization
- Dynamic mean-LPM and mean-CVaR portfolio optimization in continuous-time
- Analytische Evaluation des Risiko-Chance-Profils kombinierter Aktien- und Optionsstrategien
- Living on the edge: how risky is it to operate at the limit of the tolerated risk?
- Non-concave portfolio optimization with average value-at-risk
- CONSTRAINED OPTIMIZATION WITH RESPECT TO STOCHASTIC DOMINANCE: APPLICATION TO PORTFOLIO INSURANCE
- Guaranteed bounds for insurance premium rates for the insurance portfolio of factorizable claims
- Minimum-cost portfolio insurance
- Best portfolio insurance for long-term investment strategies in realistic conditions
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- Portfolio optimization under a quantile hedging constraint
- Less is more: increasing retirement gains by using an upside terminal wealth constraint
- Portfolio insurance and model uncertainty
- Theoretical foundations of constant-proportion portfolio insurance
- Portfolio insurance: A simulation under different market conditions
- Options on a traded account: symmetric treatment of the underlying assets
- Some new results on value ranges of risks for mean-variance portfolio models
- CONSTANT PROPORTION PORTFOLIO INSURANCE IN THE PRESENCE OF JUMPS IN ASSET PRICES
- On the interplay between distortion, mean value and Haezendonck-Goovaerts risk measures
- Portfolio optimization under entropic risk management
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